MIT’s Media Tech Club

1. MIT’s Media Tech Club November 1999

2. Gordon HoffsteinPresident & Chief Executive Officer

3. Agenda • What is affiliate marketing? • Be Free history • What is the opportunity? • How are we doing? • The competitive landscape • Leveraging our leadership position

4. What is Affiliate Marketing? Affiliate Marketing Affiliate marketing allows online merchants to promote their goods and services within the content of tens of thousands of web sites – paying a commission only when a sale is made.

5. Who Is Be Free? We power the infrastructure for the next generation of online marketing: Affiliate Marketing

6. How Affiliate Marketing Works Content Sites Partner With Merchants

7. How Affiliate Marketing Works Place Promotions in Context

8. How Affiliate Marketing Works Earn Commissions Based on What Is Sold New York Yankees righthander DavidCone has become the second Yankeein as many years to throw a perfect game, as he blanked the MontrealExpos on Sunday at Yankee Stadium. The Yankees won the game, 6-0, on Yogi Berra Day

9. Non-portal traffic 0.5% Click-through rate The Need for Affiliate Marketing • 80% of online trafficbypasses portals 80% • Traditional online marketing is not effective • 99.5% of banners are ignored

10. Be Free History • Founded in 1996 by Sam and Tom Gerace • First customer launched in September 1997 • First round of venture funding in September 1998 • Second round of venture funding in March 1999 • IPO -- November 3,1999

11. What is the Opportunity? Business to Consumer Online Sales In Billions 69% CAGR Source: Forrester Research and Jupiter Communications

12. In Billions $24.1 15% $16.7 $10.9 $6.5 $3.3 50% 1999 2000 2001 2002 2003 What is the Opportunity? Worldwide OnlineAd Spending Performance-basedOnline Advertising 1999 2003 Source: Forrester Research, Inc., August 1999 15A

13. How Are We Doing? Our Rapidly Growing Customer Base 192 76% Growth 109 53 27 13

14. Our Customers – Category Leaders

15. Our Customers – Category Leaders 15

16. Explosive Growthof Our Customers’ Reach Number of Affiliates 1,469,000 1,075,000 400,000 67,000 31,000

17. Dramatic Growthof Our Customers’ Promotions Number of Promotions Viewed In Millions 1,156 825 541 338 221

18. The Competitive Landscape Banner Advertising Affiliate Marketing commission-based model • $5,000 in gross sales • $500 paid to affiliatesassume 10% commission rate • $100 Be Free service fees assume 2% service fee • If you spend $20,000 • 2,000,000 banner adsassume $10 CPM • 10,000 clicks to your siteassume 0.50% click-through rate • 100 salesassume 1% conversion rate • $5,000 in gross salesassume $50 average sale assume $50 average sale Spend $20,000 Sell $5,000 Spend $600 Sell $5,000

19. Affiliate Marketing Works! Most Effective Marketing Methods 1 Affiliate programs 1 E-mail to customers 3 Public relations 4 Television 5 Outdoor advertising 6 E-mail to opt-in lists 7 Direct mail 7 Magazines 7 Radio 10 Sponsorships 11 Buttons 12 Banners Source: Forrester Research, April 1999

20. Competition – In-house Development An Outsourced Infrastructure for Affiliate Marketing Benefits to Merchants • Eliminates development costs • Allows focus on core competencies • Capitalizes on our expertise and knowledge • Shortens time to market • A strategic sales channel that onlinemerchants own and control

21. Affiliate Market Share 75% 20% 5% Be Free Customers Closest Competitor All Others Source: Be Free Analysis, September 1999 Our Dominant Leadership Position Number of CustomersAmong Top 50 Sites 11 3 1 Be Free Closest Competitor All Others Source: Media Metrix, July 1999 21

22. Leveraging Our Leadership Position • Expand our customer base • Expand internationally • Launch of bol.com (Bertelsmann) in Europe • Provide new products and services • B-INTOUCHSM — E-mail affiliate marketing • Private branded networks — Visa Partners Network, SmartAge • Profiling technology for targeting promotions

23. MIT’s Media Tech Club November 1999

24. Our Affiliate Marketing Infrastructure Affiliate Merchant Recruitment Management Sales PromotionsViewed Tracking Click-Throughs Click-Throughs Decision Supportand Analysis

25. Critical Success Factors • Attract, develop and retain the best associates • Create the infrastructure and internal processes that will allow us to provide the highest level of customer satisfaction • Attract customers with the commitment and resources to build highly successful affiliate sales channels • Continue to develop reliable, intuitive and scaleable technology that meets our customers’ evolving needs • Obtain the necessary financial resources to achieve our business objectives • Develop new products and services in a timely and consistent manner

26. Critical Success Factors • Position the company as the leader in affiliate and database marketing through aggressive and ongoing public relations and marketing programs • Create a corporate culture that rewards innovation, creativity and teamwork in order to stay at the forefront of industry trends and changes • Create strategic alliances that will enhance our position in the marketplace • Contribute to our customers’ success by educating them about the industry’s best practices in marketing, affiliate outreach and affiliate management

27. Be Free’s Solution A Robust Infrastructure for Affiliate Sales Channel Hosted Services Accessible Through the Internet